Underscoring the pivotal role of the former Citi banker in shoring up the countrys economic defences, the end-January announcement that Fischer would leave the institution in June, two years before the end of a second term, triggered a mild sell-off in the countrys government bond market and fears among Israeli observers. The adulation and trust invested in Fischer is entirely justified. The former IMF deputy managing director's astute policy moves, before and after the Lehman Brothers collapse, have boosted his status as a highly respected economic soothsayer, whose pronouncements are observed globally transcending the influence of the $240 billion-plus Israeli economy. Fischer Euromoneys central bank governor of the year in 2010 helped to shield Israel from the storms emanating from the US syndicated loan crisis, in the months preceding the Lehman collapse, stepping up acquisitions of foreign-currency reserves and embarking on quantitative easing (QE) through purchases of long-term debt. The Bank of Israel chief has helped to insulate the economy from the global storm by intervening in the foreign exchange market, ensuring that the export sector was not demolished by an uncompetitive shekel.
|Stanley Fischer, outgoing governor of the Bank of Israel|
The strong assumption is that his replacement will continue monetary expansion, amid anaemic growth and stresses in the housing sector. But Fischers policy creativity is thanks to his unassailable brilliance as a macroeconomist, as well as his market nous as a central banker.
He leaves big shoes to fill. Indeed, Fischers market instincts and astute knowledge of economics endow him with impeccable credentials to lead the Federal Reserve in 2014, a prospect even his supporters concede is unlikely given his age and outsider status.